The purchase price is US$25 million, equivalent to US$76 per oz. gold for underground reserves and about US$34 per oz. for underground resources.
Viceroy estimates the Bounty mine will have a sustaining capital and development cost of about US$5 million per year.
“We are acquiring an asset with an experienced and expert operating team,” says the company’s president, Clynton Nauman, who adds that the move will enable Viceroy to almost double gold production and expands its reserve and resource inventory significantly.
Forrestania will transfer to Viceroy its 100% interest in Bounty, held through its wholly owned subsidiary, Bounty Victoria, in return for a cash payment of US$13 million and the issuance of 12.8 million preferred shares and 3.3 million common shares, the total value of which is US$11.6 million.
The transaction will also preserve more than US$45 million in tax loss carry-forwards that will transfer with the asset.
Viceroy has the option of acquiring additional mining leases for a maximum of US$5.2 million and 3.3 million Viceroy common shares over a 1-year period. These leases are said to contain significant gold resources that may also be amenable to heap leaching.
Situated 360 km east of Perth in Western Australia’s Forrestania-Southern Cross Archean-aged greenstone belt, the Bounty is a combined underground/open-pit mine equipped with a 750,000-tonne-per-year carbon-in-leach plant. Annual production, mostly from underground, is projected to be 120,000 oz. at a cash operating cost of US$220 per oz. A newly developed extension of the original orebody, which is believed to contain a resource of about 400,000 oz., remains open at depth and along strike to the south.
Reserves, calculated on a fully diluted basis, weigh in at 1.9 million tonnes grading 5.3 grams gold per tonne, equivalent to 324,000 contained ounces. These are contained in a mineral resource of about 3.4 million tonnes grading 6.5 grams gold, or 715,000 contained ounces. Production is expected to continue at least until 2004.
“There is significant exploration potential on the approximately 1,000 sq.
km tenements held by Bounty Victoria,” says Viceroy Chairman Ronald Netoletzky. “Major advances have been made in the understanding of the regional geology, leading to the delineation of new gold resources and drill targets close to the mine operations.”
Gold mineralization is hosted in a steeply dipping banded iron formation with widths varying between 5 and 25 metres.
From its first gold pour in 1989 until June of this year, the mine has recovered more than 1 million oz. gold from about 6.7 million tonnes of reserves with an average grade of 5.2 grams per tonne.
In addition to the mine transfer, Forrestania and Viceroy will form a 90-10 joint venture aimed at exploring for and developing nickel prospects on the Bounty property. Forrestania will manage the program.
Viceroy reported second-quarter earnings of $797,000 (or 2 cents per share) on sales of $17.3 million, compared with year-ago earnings of $1.56 million (3 cents per share) on sales of $18.8 million. Cash from operations rose to $31.6 million from $3.8 million between the two periods. Also, Viceroy realized an average gold price of US$403 per oz. during the recent quarter, compared with US$404 a year ago.
For the first half of the year, Viceroy rang up a profit of $597,000 (1 cents per share) on sales of $28.8 million, compared with a loss of $200,000 on sales of $34.9 million during the corresponding period last year. Cash from operations over the period totalled $34.4 million, compared with $5.5 million in the first six months of 1998. On June 30, 1999, working capital was $65.8 million.
Viceroy realized a gain of $2.2 million by selling its Yukon grassroots property portfolio to
Viceroy realized net proceeds of $33.2 million after closing out its existing hedge position. The mid-tier producer also managed to retire $9.7 million of debt associated with the Brewery Creek mine in the Yukon.
Second-quarter gold production at Viceroy’s wholly owned Brewery Creek mine weighed in at 9,838 oz. at a cash cost of US$314 per oz. The total cost was US$422 per oz. and includes expenses related to royalties, depletion and depreciation and reclamation. By comparision, the mine produced 14,928 oz.
at a cash cost of US$216 per oz. in the second quarter of 1998.
In the first half of the year, the mine churned out 16,664 oz. gold at a cash cost of US$317 per oz., compared with 25,270 oz. at US$224 per oz. in the corresponding period of 1998.
Owing to the seasonal aspects of the Brewery Creek operation (mining occurs between April and October, whereas heap leaching is carried out year-round), most of the production is realized during the third and fourth quarters of each year. Viceroy points out that production in the first and second quarters does not reflect the mine’s annual performance.
Second-quarter production at the 75%-owned Castle Mountain mine in California was 25,361 oz. at a cash cost of US$262 per oz. and a total cost of US$342 per oz. In the corresponding period last year, the mine produced 23,809 oz. at US$278.
During the first half of the year, the mine produced 41,695 oz. gold at a cash cost of US$294 per oz. compared with 47,268 oz. at US$313 per oz. a year earlier.
The Castle Mountain mine continues to operate ahead of budget. Viceroy is considering an alternative mining plan that would accelerate production still further.
At the Gualcamayo project in Argentina, metallurgical tests have confirmed that the oxide mineralization is amenable to heap leaching. Viceroy can earn a 60% interest in the project from Mincorp Exploraciones by spending US$5 million on exploration over the next five years.
Be the first to comment on "Viceroy buys gold mine Down Under"